Stocks rallied on Monday, with the Nasdaq climbing 3% and the Dow and TSX marking record-high closes after the United States and Iran struck a preliminary agreement to end the Middle East war and reopen the Strait of Hormuz, leading to an easing of inflation fears as crude oil prices dropped.
The deal framework — expected to be formally signed in Switzerland on Friday — did not address key issues such as Tehran’s nuclear program and the Israel-Lebanon conflict.
Still U.S. crude futures settled down 4.9% following the news and hit their lowest level since March, aiding shares of energy-sensitive airline and cruise stocks and hurting energy shares.
Rate-sensitive technology stocks rallied as investors were more comfortable taking on riskier bets with lower oil prices easing inflation fears.
“Markets are higher on a classic relief rally. We have a U.S.-Iran deal that’s driving oil sharply lower. This is easing inflation fears and basically pushing investors back into risk assets like technology,” said Gene Goldman, chief investment officer at Cetera Investment Management, in El Segundo, California.
The three main U.S. indexes marked their third consecutive session of gains, recovering after Middle East tensions and a pullback in AI-related stocks had put Wall Street’s record climb on pause more than a week ago. The Dow Jones Industrial Average rose 468.77 points, or 0.92%, to 51,671.03, the S&P 500 gained 122.83 points, or 1.65%, to 7,554.29. The Nasdaq Composite gained 795.10 points, or 3.07%, to 26,683.94 for its strongest one-day percentage gain since March 31.
The Toronto Stock Exchange’s S&P/TSX Composite Index ended up 337.79 points, or 0.97%, at 35,275.64, eclipsing the record closing high it posted on June 4.
One hope among investors is that a resumption of oil flows from the Middle East and easing crude prices could give the U.S. Federal Reserve, which is grappling with inflation, room to hold interest rates steady instead of raising borrowing costs.
Along with the Iran deal, another big focus for the week is the U.S. central bank’s next policy update, which is due on Wednesday, after Chair Kevin Warsh’s first policy meeting since he took over from Jerome Powell last month. The meeting follows May U.S. inflation data that showed higher energy costs filtering into consumer prices. Traders expect the Federal Reserve to leave interest rates unchanged this week, but are still pricing in a nearly 42% probability for a 25-basis-point hike by the end of the year, according to CME Group’s FedWatch tool.
Among the 11 major S&P 500 industry sectors, S&P 500 tech index led the gainers with a 3.4% advance. The S&P 500 energy index was its biggest laggard, finishing down 3.6%.
In individual stocks, SpaceX’s shares rallied 19.6% in their second day of trading after the Elon Musk-led firm’s blockbuster IPO pushed its valuation above US$2 trillion. The stock’s US$192.46 close on Monday compared with its US$135 IPO price. Investors had been relieved by its strong market debut on Friday as they hoped that its landmark Nasdaq launch would bode well for the broader market and for the highly anticipated OpenAI and Anthropic IPOs expected later this year.
Elsewhere, airlines were among the leading U.S. transport sector gainers with United Airlines rallying 3.9% on hopes for cheaper jet fuel with oil prices falling. Also cruise companies rallied with Norwegian Cruise adding 3.7% and Carnival Corp climbing 3.2%.
The CBOE Volatility Index, Wall Street’s fear gauge, slipped for its third day in a row after rising to a more than two-month high the previous week. The Philadelphia SE Semiconductor index finished up more than 5% for a record-high close after dropping more than 12% below its most recent record before staging a three-day comeback rally.
Big boosts on Monday came from chip giant Nvidia, which rose 3.5%, and Micron, which soared 10.5%, after at least two brokerages sharply raised their price targets for the stock.
In other movers, shares in Fox tumbled 16.8% after the company said it would buy Roku in a US$22 billion deal. Roku shares fell 1.9%.
Mining stocks were the sector leaders on Bay Street. The materials index, which includes metal mining shares, jumped 5.2% as gold and copper prices climbed. Technology added 1.2% in Toronto and consumer discretionary ended 0.8% higher. Five of 10 major sectors ended lower including energy, which lost 2.7%.
Mixed domestic data included manufacturing sales, which grew by 4.2% in April from March.
In the bond market, Treasury yields eased on hopes that lower oil prices will remove pressure on central banks to raise interest rates. The yield on the U.S. 10-year Treasury slipped to 4.47% from 4.48% late Friday.
On U.S. exchanges 21.29 billion shares changed hands compared with the 20.82 billion average for the last 20 sessions. Advancing issues outnumbered decliners by a 1.77-to-1 ratio on the NYSE where there were 502 new highs and 90 new lows. On the Nasdaq, 3,034 stocks rose and 1,900 fell as advancing issues outnumbered decliners by a 1.6-to-1 ratio. The S&P 500 posted 41 new 52-week highs and 3 new lows, while the Nasdaq Composite recorded 202 new highs and 89 new lows.
Reuters, Globe staff